A parliamentary watchdog has told Her Majesty’s Revenue and Customs (HMRC) that it should publish a report analysing the contribution of IT failures to £1.8bn in over payments during 2004/2005.

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The tax credits system overpaid claimants £2.2bn in 2003/2004, yet HMRC has not completed a full analysis of how IT failure contributed to these problems, according to a report published by the House of Commons Treasury Committee yesterday. “We have seen nothing from the department attempting to assess the contribution made by IT system error,” it said.

The committee said HMRC needed to understand the IT problems that had contributed to the massive over payment in tax credits, which family charities said have caused hardship among groups the government intended to help.

Without this knowledge it cannot improve the running of the tax credit system. “We recommend that the government undertake a complete analysis of the incidence of IT system error and the extent to which it causes or contributes to overpayments, and that it publishes that analysis,” the committee’s report said.

EDS initiated the IT system under an outsourcing deal in 2003 and was then replaced by Capgemini in the summer of 2004 after the system hit problems. In October last year the government said it had paid the suppliers £236m for the failing tax-credits system. EDS agreed to pay the government £71m in compensation for the failures in November 2005.

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